When news broke late Friday that billionaire hedge fund titan Carl Icahn, professional golfer Phil Mickelson, and Las Vegas sports bettor Billy Walters were embroiled in an insider trading investigation involving both the Federal Bureau of Investigation and the Securities and Exchange Commission, it left many in the finance, sports, and legal worlds scratching their heads.

So just what constitutes insider trading, what are the standards of proof required for prosecution on a criminal and civil level, and what does this mean for this case? Here’s a guide to understanding what’s happened and what’s ahead for all involved.

What exactly has to happen for an investment to be considered “insider trading”?

According to Michael Bachner, partner at the criminal defense law firm Bachner & Associates, insider trading at its most basic level means trading on information that has confidential material, and acquired in breach of a fiduciary duty or a promise of confidence to a particular audience.

“The information that you get had to be acquired by a way that is in breach of the fiduciary that you have,” Bachner said. “It has to be nonpublic, it can be disseminated yet or taken into consideration by the market already, and then it has to be in breach of a duty to keep it quiet.”

In the Icahn case, federal authorities are looking into whether Walters passed on information to Mickelson regarding shares of Clorox, with which Icahn was involved in a proxy fight at various points of time in 2011. In July of that year, Icahn made a $10.2 billion offer for the company, causing a jump in the price of the stock. Icahn and Walters were friends and had discussed stocks in the past.

“If Icahn had told Walters to buy something and Walters knew Icahn was involved in a deal or mergers and acquisitions deal with that company and he bought on that information,” Bachner said. “That would be a crime because he is buying on that information.”

What is the standard of proof for insider trading and what are the differences between civil and criminal cases?

“In terms of proof, one of the more difficult elements to prove is that there was a breach of fiduciary duty and that the information provided was nonpublic and material,” said Jeffrey Cox, a partner at Sallah, Astarita & Cox, a law firm specializing in white collar crime and securities fraud. “In Basic v. Levinson the Supreme Court decided that, typically, materiality is whether there is a substantial likelihood that the disclosure of the information would be viewed by a reasonable investor as having significantly altered the total mix of information available.”

As for the standard of proof in a civil versus a criminal case, white collar criminal defense attorney Solomon Wisenberg said there are very distinct criteria prosecutors have to meet.

“Criminal is a higher burden, beyond a reasonable doubt, and you have to show an absolute criminal intent of fraud,” Wisenberg said. “Insider trading is a species of fraud. When the SEC brings a civil act, it’s a preponderance of evidence, they can show recklessness or negligence so it’s easier for them, which is one of the reasons people tend to settle with them.”

How does the SEC become alerted to these kinds of cases?

There a few potential triggers that can turn authorities onto insider trading cases: unusual trading activity, an individual with a history of suspicious or fraudulent trades, or a tip from someone with knowledge of the activity, Bachner says.

“There are times when someone is on the FBI’s radar screen because they believe he was involved in these activities in the past, or someone says something about it, and also they have sophisticated trading equipment that looks at people who took a large position in something in the time before a deal happens,” Bachner said. “You would think that with [Icahn and Mickelson’s] position, that someone put them on to them or said something given their profile.”

Robert Heim, a former SEC prosecutor and currently a practicing attorney at Meyers & Heim, disagrees, saying he believes suspicious trading activity likely triggered an insider trading investigation in the case of Icahn, Mickelson and Walters.

“I think that indications are that during routine market surveillance there was an increase in the amount of options that were bought in the days leading up to the announcement,” Heim said of the Clorox deal. “And there are computer systems in place that look for aberrations in trading and I think it’s very likely the SEC’s computer monitoring systems flagged this. There are certain parameters that get hit and it has to do with how active the trading is and the past volume and price activity in options.”

How successful are regulators usually in proving these cases?

“Oftentimes insider trading cases can be difficult to prove because they’re based on circumstantial evidence,” Cox said. “The individuals accused of insider trading are not speaking to the government or cooperating in any way. Oftentimes they’re going to be based on documents.”

Bachner added, “It’s normally a very difficult thing to prove without having an insider say that ‘I was part of it and that we knew and we discussed and we talked,’ unless there’s very strong circumstantial evidence — like I had a client where there were M&A files that he wasn’t working on — that they can demonstrate that this was happening.”

How hard will this particular case be to prove?

The consensus so far has been: very.

One indicator is the fact that the investigation has dragged on for years, according to Heim. Another is an apparent lack of evidence.

“They would have to prove that they either knew or were reckless in not knowing that it had been given to them in breach of Carl Icahn’s duty to his fund,” Heim said. “It’s going to be a somewhat difficult case for the SEC to prove, in the last couple of years the SEC has been successful in a lot of cases because there’s been an email or recorded phone calls that have been very incriminating — in this case they don’t have that so here all they’re left with is suspicious trading activity and when the trade was made. And I think the SEC recognizes that and it’s been about three years since the trades occurred and so it shows that maybe they don’t have a strong case. Normally cases can be brought in a year, year and a half, and here they’ve been poring over trading records of Icahn and still they haven’t filed a case yet.”

Perhaps more problematic for the prosecution’s success is the fact that the public now knows about the investigation, Wisenberg added.

“The investigation is not going to go anywhere, especially with respect to Mr. Mickelson and Mr. Icahn,” Wisenberg said. “It’s been disclosed number one so they’re not going to get any wiretaps or anything like that, number two is that Icahn is incredibly sophisticated and has been investing for many years, and the idea that he would be so stupid as to do this is beyond me. If you’re going to go against the king you best be prepared to kill or be killed yourself.”